January 8, 2019 David Horton - Managing Director, Global Head of Innovation
With recent U.S. stock markets plummeting to 1929 Great Depression levels and ‘No-Deal’ Brexit prospects in Europe, one could arguably claim that 2019 begins with all the key ingredients for an imminent ‘Finpocolypse’. Banks finally appear to be resolute on trying to remove internal legacy inhibitors, both people and technology, and are more willing to invest and establish in a new range of digital products and services. In an era of unparalleled access to personal data, consumer choice and technology innovation, FOMO (Fear Of Missing Out) is driving banks to be more creative, take more risks, and experiment with non-traditional revenue streams. 2019 could well be the year when the fourth industrial revolution reaches an inflection point, and for banks who have taken the digital transformation challenge head-on, execution has never been more important than strategy. In meeting with decision-making bankers across the globe, I have compiled a brief list of trends that I believe will dominate technology investment for 2019.
No. 1: The Year of Job Automation – Rise of the Tony Stark banker.
2019 will be the year of robotic process automation, and regular success stories in the media confirm that Artificial Intelligence (AI) is now mainstream in most industries – banking included. The topic of automation dominated the TED and Davos circuit in 2018, and at this year’s World Economic Forum politicians, entrepreneurs and leading economists all attempted to explain the societal impact that automation will bring.
“With great Automation comes great Anxiety” – the fear that smarter machines will cause mass unemployment is a growing concern for all collar workers.
Naturally the debate about machines taking jobs dominate such topics, but the general consensus amongst bankers today is that the more likely outcome are ‘superhuman’ employees. Whilst the development of autonomous technologies that can outperform humans in terms of both mental and physical attributes seems a little far-fetched for now, today’s technology is already allowing banks to augment their human resources with enhanced functional capabilities by using a combination of data, cognitive insight, and enterprise grade artificial intelligence, creating the Tony Stark banker, as it were.
Given the impact that automation and other AI technologies will have on banking in 2019, below is a list of the most likely area’s that will experience AI job transformation first hand:
Customer service bank jobs, particularly those dealing with complaints and common queries are frequently described as inefficient and it is estimated that as much as 85% of these interactions could be managed by bots in the next two years. In China, Ali Baba’s own ‘Jarvis’- like system Ali Xiaomi is claimed to be capable of handling 95% of all customer service queries.
Call Center and Branch staff will need to upskill and reskill with a real sense of urgency in 2019.
Not surprisingly a new set of jobs is increasingly being created by the scaled up adoption of AI – ‘Validators’. Bankers don’t change their pin-stripes easily, and whilst the promise of automation is compelling, banks will still want humans to validate AI findings and ensure experienced oversight, especially as the technology can be notoriously glitchy during its initial phase of implementation.
Real-time crisis management and fraud detection are two key area’s in which superhuman bankers are likely to transpire and excel in 2019. Improved cognitive capabilities, actionable insights, and the federated use of connected neural networks will enable bankers to provide an elevated level of security, and trust, for their customers. They will also empower a new breed of financial advisor who will be expected to no longer provide services easily accommodated by robo-advisors, but instead give personalised advice on more complex subjects like inter-generational wealth inheritance, alternative investment strategies, private equity opportunities and other asset allocations based upon unquantifiable factors which automated algorithms currently do not do.
No. 2: Ecosystems – It’s not just about banking anymore.
Banking has long been an integral component of key life events, whether buying a first home, a car or financing the cost of getting married. Over the past few decades mainstream banking products and services evolved to encompass new industries like insurance and gave access to lifestyle benefits as a means to encourage loyalty. Beyond the actual revenue generating products and services however, banks rarely concerned themselves with the day to day factors of these industries, despite the fact that they generated all the demand for their products….often considering them ‘non-core’ to the banking business model. With the advent of open API infrastructures this has started to change, and 2019 will see even more banks looking to invest in building strategic business ecosystems. Take for instance the popular app TrueCar, which allows customers to search, research and purchase new and used cars whilst ensuring that they get a fair price on the car. Banks like JPMorgan Chase are investing in the auto market ecosystem to ensure that they remain relevant when it comes to auto financing options. What has become evident is that when ecosystems connect to each other, data analytics and customer experience provide a powerful catalyst for a thriving innovation environment. Look to what is happening in China at the moment, we are witnessing an explosion of O2O (online-to-offline) startups in which non-financial data is developing an ‘intelligence layer’ never seen before. With WeChat’s billion monthly active users making payments and eCommerce transactions on this unified online ecosystem, data has become centralized, structured and accessible to countless Chinese FinTechs (and in particular mobile payment providers) who are reinventing the way in which people go about their daily lives and run their small businesses. Banking services are key to all of these and flourishing as a result.
Being able to integrate multiple platforms, partners, products and services together – fast – is how banks in 2019 will look to compete in the digital economy. It is often said that customers don’t shop for a mortgage or an auto loan, they shop for a house or a car – so it seems logical that banks will look to develop the ecosystems that put them front and center of the experiences dictating those events. More financial institutions are looking to open up their assets to third parties (and vice versa) so partners can develop new applications using new business models to generate sources of revenue. In 2019 we will witness a multitude of industry verticals like banking, real estate, health, travel and hospitality, converge into a ‘network of ecosystems’ which will drive new customer experiences. The single biggest challenge to creating these new business revenue lines will be that these intra-ecosystems and information assets are complex and give rise to many business model challenges from revenue assurance to settlements. Figuring out how to ensure all stakeholders involved in the end-to-end service delivery are adequately compensated is never an easy task.
No. 3: Digital Onboarding – Reimagining Customer Acquisition.
As competition between incumbents, challenger banks and FinTech’s continues to drive the industry’s transformation agenda, the topic of smooth onboarding for new customers has grown in importance. As 2020 is often described as the year in which millennials represent the most profitable segment for banks, it is an obvious area for banks to focus on during 2019 – particularly from a mobile-first viewpoint.
In the context of banking, digital onboarding relates to the end-to-end activities involved in introducing a new customer to your financial products and services, matching their individual needs and eligibility to a personalised solution seen as a ‘best fit’, and finally processing the required identity, regulatory and risk information to complete the experience. Several industry studies show that when customers are properly on-boarded, not only does it strengthen NPS, but it results in brand advocacy and most importantly generates a much higher engagement/activation rate.
In 2019 banks will focus on improving their customer on-boarding experience by adopting a design thinking approach, recreating mobile and web user interface’s and using smart technology to automate tasks like uploading documents, photo’s and disseminating the required data from these files by using new image recognition technology. For Bankers in 2019 it is finally clear that the customer interface is amongst the most important part of the value chain, and they will need to build next-generation web portals and intuitive digital channels that leverage the ecosystems previously mentioned.
With improved access to cleansed and structured Data warehouses, banks will also look to build a proprietary Customer Experience Database (CXDB) that will drive new contextual propensity rules with an objective of automatically upselling and cross selling products based on actionable insights. A well architected CXDB will contain trigger points for customer ‘Moments of Truth’ like when someone is getting married, having a child, buying a house for the first time, or even losing their job. These triggers will invoke targeted marketing and lead generation campaigns from propensity context rules that will identify sales opportunities at exactly the right moment.
The signs for a tumultuous 2019 in the banking industry are ominous. Political and macro-economic influences are exacerbating an industry that is already facing several threats – whether it be new business models, challenger banks, emerging technologies, or an era in which digital customers simply want different solutions. In 2019, the most progressive banks will be having open and honest debates about future market evolution, the potential impact on their business, and how they should respond to these scenarios. The time for digital lipstick is over, and bankers will need to ask pressing questions of each other like “Where do we create value today?”